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Economic activity dips on lower private consumption, investment

Overall economic activity in November softened from the previous month due to a contraction in private consumption and investment, the Bank of Thailand announced yesterday.

Production in export-oriented industries, however, expanded thanks to a gradual improvement in merchandise exports, while the tourism sector continued to expand despite China's new tourism law and Thailand's political protests.

On the stability front, inflation rose on the back of increased pass-through of higher costs to prepared-food prices.

The current account registered a surplus thanks to an improvement in the trade balance, as well as in the services, income and transfers balance. The capital account registered a deficit, due mainly to outflows of foreign portfolio investment.

Overall, the balance of payments recorded a deficit, said the central bank.

Private consumption dropped from the previous month as households remained cautious on spending given their previous debt accumulation and weakening confidence. The Private Consumption Index fell by 2.4 per cent year on year.

This softening in spending was down primarily to a contraction in purchases of durable goods - and particularly automobiles, on account of last year's high base and a decline in new orders.

Imports of consumer goods, especially durable items, also fell. Meanwhile, spending on non-durable goods only rose at a slower pace.

Private investment edged down slightly from the previous month. However, compared with the year-earlier level, the Private Investment index dropped 7.8 per cent on account of a decline in commercial car sales, as well as in machinery and equipment imports.

Some businesses continued to postpone their investment, awaiting clearer signs of an economic recovery. Meanwhile, construction investment grew at a moderated pace.

Exports of agricultural and manufactured products - especially processed agricultural products, electrical appliances, and petrochemical products - advanced gradually due to improving global demand.

However, some merchandise exports continued to face supply-side constraints, particularly fishery products following the shrimp-disease outbreak.

Meanwhile, exports of electronics and parts increased only slightly, due to limited production capability to take full advantage of increasing global demand for hi-tech equipment.

Steel and metal exports continued to fall from a high base last year.

Manufacturing production, particularly in export-oriented industries, posted a modest increase in tandem with a slight improvement in exports of merchandise goods.

However, the Manufacturing Production Index fell 10.6 per cent year on year mainly on account of a fall in automobile, frozen-shrimp and hard-disk-drive output.

Merchandise imports fell 9.3 per cent year on year, held down by declines in almost all categories except fuel in line with softening economic activity.

Farm income rose by 5.8 per cent, thanks primarily to an increase in agricultural output - in particular, rice and rubber production. However, shrimp disease continued to affect production.

Farm prices slightly increased on account of rising prices of shrimp and livestock. Rice prices continued to decline in tandem with falling global prices following good harvests in major producing countries.

Rubber prices also fell, due to excess supply despite an increase in foreign orders.

The tourism sector expanded with 2.4 million foreign arrivals, up 11.9 per cent. The number of tourists from all regions rose despite the political turbulence and the implementation of China's new tourism law.

Fiscal spending contracted, due to last year's high base. The contraction was also attributable to investment outlays that were delayed due to the political protests.

Government cash receipts fell following declines in excise tax, VAT, and import-duty revenues in line with the economic slowdown.

Headline inflation edged up to 1.92 per cent following increases in fresh food and energy prices, while core inflation increased to 0.85 per cent.


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